The Farm Bill Will Make Some Subsidized Congressmen Anonymous, and More

By Veronique de Rugy —
June 17, 2013

Much has already been said about the farm bill going through Congress. It’s bloated, it redistributes money from taxpayers to relatively wealthy farmers, it hurts young farmers by artificially inflating the price of land, it ends direct payments but substitutes another kind of subsidy, and so on and so forth. But there’s always more: For instance, the replacement of direct payments with a new crop-insurance subsidy will prevent the names of many members of Congress who get farm payments from being publicly disclosed. The Huffington Postexplains:

The nonprofit advocacy group’s latest survey comes as Congress begins to debate farm legislation that will reform the agriculture safety net — and potentially reduce transparency in the government’s support system for farmers, sparing lawmakers headlines about government help they receive.

The House and Senate farm bill drafts eliminate most direct payments and instead boost subsidies for farmers to buy crop insurance policies that protect against losses from weather or price changes. Since the government divulges the names of people who get the payments but not the insurance subsidies, the Environmental Working Group’s Scott Faber says the bills as they stand now would reduce government transparency.

“Although much ballyhooed, the end of direct payments really heralds the replacement of an inequitable and transparent safety net with a more inequitable and less transparent safety net,” Faber said. “Crop insurance subsidies have no limits on who can receive them and the amount they can receive.”

There’s also a host of items that will make food more expensive and cater to the endless demands of entrenched interest groups. For example:

Tucked deep in the 1,198-page U.S. House agriculture policy legislation is an initiative to guarantee prices for sushi rice. So too is insurance for alfalfa and a marketing plan for Christmas trees.

Catfish farmers also get a morsel in the proposal being taken up this week: profit-margin insurance. The products represent a tiny fraction of the $440 billion U.S. farm economy. Yet each is slated to receive special treatment — either through subsidized insurance, promotional programs or protections against imports — in the bill that carries an estimated 10-year price tag of $939 billion. . . .

The farm bill, which benefits crop-buyers such as Archer-Daniels-Midland Co. (ADM), grocers including Supervalu Inc. (SVU) and insurers including Wells Fargo & Co. and Ace Ltd (ACE), has been working through Congress for almost two years. The Senate last week passed a version that would spend $955 billion over 10 years; the House this week is considering a version approved by its agriculture committee. The current, five-year authorization of U.S. Department of Agriculture programs passed in 2008 and was extended last year until Sept. 30.

There is much more here. I find the guaranteed-price policies particularly curious, especially as part of a bill that includes $80 billion a year for food stamps — on the one hand, the government makes the price of food more expensive by sheltering producers of sugar, for instance, from competition, while it also subsidizes food purchases by low-income Americans.

Ending farm subsidies should be a no-brainer. Besides, there is some evidence that you can cut much of it without even affecting farm production. A new study by Vincent Smith, a professor of economics at Montana State University, published this week by the Mercatus Center looks at the current farm bill proposals by the House and Senate Agriculture Committees and concludes that farm subsidies could be reduced by at least $9 to 10 billion per year — about 50 percent of the current level of subsidies and 10 percent of current farm-bill spending — without any measurable effect on agricultural production. He also notes:

A recurring justification for these subsidies is that farmers need a safety net because farming is such a risky business. This claim is inaccurate.

The annual failure rate for farms is 0.5 percent. The annual business failure rate, at 7 percent, is 14 times greater.

The average debt-to-asset ratio in farming is currently 10 percent and has not exceeded 15 percent since the late 1990s. This indicates that farmers generally face very little financial risk, and as a result, even less-efficient farming operations are able to survive.